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Percentage of Roth (IRA + 401k) in retirement portfolio
Old 06-08-2014, 07:18 PM   #1
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Percentage of Roth (IRA + 401k) in retirement portfolio

Just a general question to see what the folks of this forum are doing:

As the title suggests, what is the Roth (IRA + 401k) portion of your overall retirement portfolio? We are sitting at 16%. We hope to eventually up it to 25%. Without knowing what your retirement tax rate will be and assuming the current laws are no changed, what would you say the sweet spot (in terms of percentages) is for holding tax free money?

I know there are lots of "depends" in answering something like this. Think of this as a survey and not an academic argument .

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Old 06-08-2014, 07:32 PM   #2
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Since I'm assuming that tax rates are more likely to go up rather than down in the future, I'm moving/contributing as much as I can to a Roth IRA while staying in the 15% tax bracket. Current percentage of retirement accounts are about 60% Roth, but does not count taxable portion of portfolio.

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Old 06-08-2014, 07:34 PM   #3
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Currently 22% (and 31% taxable, 47% tIRA), but changing fast with Roth conversions. Won't quite make it to 100% according to the current plan. My ideal would be to have it all in a Roth account.
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Old 06-08-2014, 08:14 PM   #4
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At retirement this year (age 54) mine will be at about 55% tIRA/401K. Even with significant Roth conversions over the next 10-15 years I expect it to remain about 30-35% tIRA by the time mandatory withdrawals begin at 70.
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Old 06-08-2014, 08:17 PM   #5
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As with my investments, I'm always interested in diversifying my accounts as well. The reason: nothing is guaranteed in Washington. Just as they started to double-tax SS benefits (up to 35% of your SS payments were already taxed with income tax when your employer withheld them from your paycheck, but in the early 90s, they started double taxing them, depending on your income level), they can just as easily enact a wealth tax on your ROTH account. Doesn't matter if they ignore pensions and annuities and other assets. Doesn't matter how "unfair" it is. They did it before, and they can do it again.

Because of that, my ideal blend when withdrawing for living expenses would be about 50:50 traditional IRA to ROTH...however, given my tax rates now and assumed tax rates in retirement, I'd rather tilt it towards deferred traditional IRA now, so I can do conversions in a lower bracket when retired.

So my current goal would be about 75% traditional to 25% ROTH when first reaching ER.

My current breakdown (at age 37, probably 5-6 years from retirement)

71.0% Taxable
16.9% All deferred accounts (SEP IRA, Inherited IRA)
6.3% ROTH
4.4% I-Bonds (deferred up to 16 more years)
2.6% HSA (potentially triple tax free if used for healthcare; otherwise deferred)

Current ratio among tax-deferred is
66% Traditional
24% ROTH
10% HSA

I don't qualify for ROTH contributions (can't backdoor them anyway, since I have a SEP IRA rather than a 401k), so my contributions will be almost all in the traditional account for the next few years...which is what I wanted anyway.
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Old 06-08-2014, 08:18 PM   #6
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Yes, the ideal is 100% Roth, held long enough that you can start withdrawing contributions before 59 1/2. Everything else is a compromise with reality, with considerations to your current and future tax rates. I know you said not to worry about your retirement tax rate but it just makes no sense to even talk about a sweet spot without knowing something about one's specific situation. If you're asking what people actually have, I'd say worry about yourself and not others because I can pretty much guarantee my situation is not yours.
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Old 06-08-2014, 08:24 PM   #7
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60% Roth, 35% Taxable, 5% IRA / 401k
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Old 06-08-2014, 09:19 PM   #8
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100% Roth. Since my bulk conversion in 2010 its value has roughly doubled, all tax free, so far so good.
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Percentage of Roth (IRA + 401k) in retirement portfolio
Old 06-08-2014, 10:27 PM   #9
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Percentage of Roth (IRA + 401k) in retirement portfolio

About 20% Roth now. Will convert more as long as tax is 15% or less. Always will want some tax deferred as rate is 0% for standard deduction and exemptions.
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Old 06-09-2014, 04:10 AM   #10
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zero roths so far . no way will we be in a higher tax bracket when two pay checks stop.

each persons situation will be unique to them but for us we view things differently.

throw in rising tax brackets allowing more and more income through at less and less taxes, the extra exemption and you can pay 1800 bucks total tax on 42k in income from traditional ira's for a 65 year old retired couple.. that is a 4.5% effective tax rate.

i can pull from ira's first while delaying ss and add some low taxable money from my taxable account and pull 42k a year in traditional ira money and have that ira money taxed at an effective tax rate of 4.5% while reducing rmds later on.

in fact 22k a year can be totally tax free if i start pulling at 62 letting me pull 176k in totally tax free money over 8 years until i take ss or if i figure on 42k i can pull 336k out at an effective rate of 4.5%. .

that is money free from taxes just for the taking by taking advantage of the exemptions and deductions we get each year on ira money..

move from a high tax state to a low or no tax state and it becomes even more of a difference.

how much would tax rates have to go up for many of us to beat deductions up front on traditionals?

if you are marginal for getting ss taxed roths can pay off . but for most seniors in our generation payback from roths may be highly unlikely i think.

why? because we focus on the wrong parameters .

a recent study shows a roths true advantage is in having a long period of ramping up time in income spanning decades while contributing.

our generation had no such ramp up time since for many decades of our working lives roths didn't exist.

a long ramp up time over decades from low pay to higher pay usually averages out to a much lower tax bracket overall than just looking at the final years as folks typically figure off of. odds are at retirement your tax bracket will be higher then that long term average spanning decades had we had roths for that long.

but our generation got in to roths way to late in our careers and we missed the decades of ramping up. for many of us our working average tax rate is higher than retirement making a roth not the best choice.

a roth can yield as much as 20% more spendable cash in retirement just from this aspect of ramping up and average tax rates being lower over those decades..
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Old 06-09-2014, 06:21 AM   #11
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Taxable: 19%
Roth: 33%
tIRA: 47%
HSA: 1%

Just balancing between 25 and 25% tax brackets, so will fill up 15% bracket with Roth and use tIRA to remain in the 15%.

Did not realize I was paying 25% on part of the Roth contribution last year. Holding off on the Roth/tIRA contributions until next spring at tax time to see how I should contribute to minimize taxes.
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Old 06-09-2014, 06:40 AM   #12
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About 80% of my retirement portfolio is in traditional IRA/401K investments. There are two reasons for this:

(1) Much of this investing was done before Roth vehicles were available;
(2) 401K contribution limits were (and are) about three times higher than Roth IRA limits and the Roth 401K option was only given to us in my last year or two at Megacorp. So if I maxed out both my traditional 401K and my Roth at work, I was putting three times as much into the 401K (though in reality, the ratio was closer to 3-to-2 which including my wife's Roth as well).

Now that we are in the 15% tax bracket I've considered doing some Roth conversions of my existing TIRA, but that would hit MAGI and put us over 300% of the FPL which is a critical decision point for me due to ACA considerations.
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Old 06-09-2014, 07:08 AM   #13
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6.9% of my IRA is ROTH - I'll probably get that up to 12% with a few more conversions before I start collecting my pension.
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Old 06-09-2014, 07:25 AM   #14
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Little for us (I include HSAs as well as Roth) as the opportunity occurred late in my career.

I expect tax-free to ultimately predominate as I spend down taxable in ER and do Roth conversions and make HSA contributions. I project 50/50 tax-deferred/tax-free at age 70 (taxable will be gone by then).

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Old 06-09-2014, 01:12 PM   #15
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Ages 37/39.
47% Roth
53% Tax-Deferred
0% Taxable (slated for pre-retirement spending)

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